Stock Lawyer Securities Fraud and Class Action Lawsuits 3

Question 1

Under Section 11 of the Securities Act of 1933, which party bears the burden of proof regarding due diligence?

Accepted Answer

The defendant must prove they exercised due diligence as an affirmative defense

Answer

The plaintiff must prove the defendant acted negligently

Answer

The plaintiff must prove scienter and actual reliance

Answer

Both parties share an equal burden of proof

Question 2

What does the term 'materiality' mean in the context of securities fraud?

Accepted Answer

There is a substantial likelihood that a reasonable investor would consider the information important

Answer

The fraud must involve physical or tangible assets

Answer

The misrepresentation must result in losses exceeding $100,000

Answer

The false statement must appear in an SEC-filed document to be actionable

Question 3

Which Supreme Court case held that the PSLRA's 'strong inference' of scienter must be cogent and at least as compelling as any opposing inference of non-fraudulent intent?

Accepted Answer

Tellabs, Inc. v. Makor Issues & Rights, Ltd. (2007)

Answer

Dura Pharmaceuticals, Inc. v. Broudo (2005)

Answer

Morrison v. National Australia Bank Ltd. (2010)

Answer

Basic Inc. v. Levinson (1988)

Question 4

In a securities class action settlement, what role does the court play before approving the settlement?

Accepted Answer

The court must determine that the settlement is fair, reasonable, and adequate for class members

Answer

The court automatically approves any settlement agreed to by all parties

Answer

The court determines the exact dollar amount each class member will receive

Answer

The court refers all settlements to the SEC for final review and approval

Question 5

What is the primary function of a 'claims administrator' in a securities class action settlement?

Accepted Answer

To process proof of claim forms and distribute settlement funds to eligible class members

Answer

To investigate and build the fraud case against the defendant

Answer

To certify the class and determine initial membership eligibility

Answer

To negotiate settlement terms between plaintiffs' counsel and defense counsel

Question 6

Morrison v. National Australia Bank Ltd. (2010) held that Section 10(b) of the Securities Exchange Act applies to:

Accepted Answer

Only transactions in securities listed on U.S. exchanges or domestic transactions in other securities

Answer

Any fraud affecting U.S. investors, regardless of where the transaction occurred

Answer

All transactions by U.S. citizens, even those conducted on foreign exchanges

Answer

Only transactions occurring within the physical territory of the United States

Question 7

In securities fraud class action litigation, what must plaintiffs establish at the class certification stage under Federal Rule of Civil Procedure 23?

Accepted Answer

Numerosity, commonality, typicality, and adequacy of representation

Answer

Scienter, materiality, reliance, and loss causation for each class member

Answer

A prima facie case of fraud sufficient to survive summary judgment

Answer

Only that the class has more than 40 members and a common legal theory